A turning point of US coal stocks and dry bulk shipping?

Due to the glut of natural gas and environmentalist pressure, the domestic demand for coal has been depressed. US coal producers are looking abroad.

From Marketwatch

"The U.S. Energy Information Administration estimates 2011 exports surpassed 100 million short tons for the first time since 1992, and some market watchers expect exports to top that this year. ....................................

Higher sales prices in Asia and Europe have made sending coal to those markets more attractive, while U.S. emissions regulations and competition from cheap natural gas limit domestic demand.

Fast-growing China and India have been sucking up shipments to fuel an expansion of coal-fired power plants, disrupting traditional supply channels. South Africa -- a traditional exporter to Europe -- has been sending more shipments to Asia, creating a hole in the market that the U.S. has helped fill. "

The US coal exports could eventually hit a ceiling, as transportation costs will make U.S.-produced coal less competitively priced than coal produced closer to major Asian customers. However, shipping rates that are hovering around historic lows can help US coal exports. Meanwhile, dry bulk shipping that has been abysmal amidst a gigantic glut of ships may get a lift from increased coal transportation across the ocean.

Watch lists:
Coal- ACI, ANR, BTU, CNX, PCX
Dry Bulk Shipping- DRYS, DSX, EGLE, EXM, SB, NM

Disclaimer: I have no position of the above mentioned stocks in my personal account as of 2/6/2012. However, I may have distributed the information to friends, family and affiliates prior to the post. My friends, family and business affiliates may have positions in stocks I mention.

How Much is SINA Worth?

It is an understatement to say that the future of SINA lies with Weibo.

SINA, one of the largest media portals in China, is transforming itself into a Twitter-Facebook hybrid. Starting out as a Chinese version of Twitter, Weibo is on its way to becoming the Chinese version of Facebook. Sina Weibo has taken China by storm, gaining 250 million registered users in 2 years and showing no sign of slowdown. This is compared to 485 million internet users in China and 800 million users of Facebook.

With all the buzz, shares of SINA, however, are not considered bargains by traditional valuation standards. SINA, on February 2, 2012, was valued at $4.86 billion in the US stock market, with a forward PE ratio over 60. Has its shares price gone ahead of itself or this is just the beginning of a super growth stock?

In other words, how much is Weibo worth and how much has been priced in? I am not here to throw a single number out but instead I would like to find out, by a reasonable stretch of imagination, whether there is any room to the upside from its current market valuation.
Valuation 1: Taking away Sina's value as a media portal , how much is it worth?

As of February 1, 2012, the market capitalizaion of SOHU was $2.28 billion versus SINA at $4.86 billion. The estimated revenue of for SOHU in 2011 was $850.33 million versus $464.99 million. That leaves a Price-Sale ratio of 2.68 for SOHU. With the same multiple, SINA should have a market cap of $1.25 billion. That means SINA weibo reaps a market cap of $3.61 billion. Can it be worth that much? Since SINA weibo currently has no revenue, I will use a social media benchmark for a reasonable multiple.

Valuation 2: Comparisons with American peers, Facebook and Twitter

Both Facebook and Twitter are not yet publicly traded, thus rendering their valuations a guessing game. A recent private investment indicated Twitter valued between $8 and 10 billion while recent trading on SharesPost showed a value between $6.8 and 7.7 billion. Facebook, is valued between $70-$100 billion depending on the sources. Given an estimate of 2011 revenue of $140 milllion  for Twitter and $4 billion for Facebook, the price-to-sales multiple of Twitter is much higher than Facebook. Leaning to the conservative side, I use only Facebook as the benchmark. Considering the prejudice against Chinese concepts just very recently, 50% discount of Facebook's multiple for is assumed forWeibo.

As you can see from Figure 1 (click on the image to a larger view), assuming SINA without revenue from businesses other than Weibo and ignoring discounting, Weibo will have to reap a revenue of $600 million,$500 million, $400 million for a multiple of 7.5, 10 and 12.5 respectively to justfify any upside in market capitalization. Are these possible? Let's look into Weibo's monetization.

What could be the revenue?
The biggest bang of Weibo monetization will come from its experimental business platform similar to Facebook page that caters to businesses' connecting directly with users and a spread of words among users. According to SIG analyst, Chunming Zhao's calculation, annual revenue of Weibo when the business platform is executed will be as much as $1 billion. This calculation assumes Weibo gets 150,000 business users (half of what Baidu currently has) and 40,000 RMB per customer (Baidu's average revenue per user (ARPU)). This is used as the upper limit of revenues in the second valuation.

Conclusion
From the above exercise, it is not totally unreasonable for SINA to have more upside, and possibly a big one if its plan to monetize Weibo follows the path of Baidu, Twitter or Facebook. Of course, skeptics could say it is a big “if"

Disclaimer: I have no position of SINA in my personal account as of 2/4/2012. However, I may have distributed the information to friends, family and affiliates prior to the post. My friends, family and business affiliates may have positions in stocks I mention.

3 cases for DANG

Coined as "Amazon of China", the Chinese B2C company, Dangdang (DANG) that was barely $5 at the start of the year, soared by 70% to as high as $8.50 before it retreated to $7+ toward the end of January. There were many non-DANG factors that contributed to a great run, namely, the revival of Chinese-concept stocks that were beaten up in most of 2011, the return of chasing "growth" as governments print money and European debt crisis was tentatively brushed aside, and last but not least, the euphoria surrounding the historic IPO of social media giant, Facebook. All these buzzes aside, DANG has some merits to itself. These may not merit a 70% run in less than a month but they may merit a much higher valuation in 12 months than what it is now.

1. Significant Upside of the Ecommerce market in China

The growth of the ecommerce market is of lightning speed. The ecommerce market in China is expected to reach 2 trillion RMB ($310 billion ) by 2015. A rising tide lifts all boats. Currently DANG’s market share is somewhere between 4-9% (depending on the source of data). Take the worst case scenario that Dang does not grow the market share at all from now on . The market share even goes down some to 3%, it gives a sale of $9 billion, about 18 times more than DANG’s revenue in 2011.

DANG stands to benefit and grow together with such a big wave in China’s ecommerce even if it performs somewhere between mediocrity and average.

2. The Peer Effect-Jingdong's IPO

One of the largest B2C player in China, Jingdong (360buy.com) IPO is expected to be above $ 5 billion. Jingdong's market share of ecommerce is somewhere between 18 to 32% depending on the classification and source. Its recent private equity deals indicated that the company was valued at $10 billion. DANG’s current market cap is $579 million. If it doubles, it will still be far below Jingdong.

There are two possible effects on DANG after Jingdong’s IPO: 1. Jingdong’s high profile IPO, if successful, is likely to remind investors of the great potential of China’s ecommerce market again 2. Jingdong’s IPO is likely to take investors away from DANG as Jingdong’s market share in Ecommerce far exceeds that of DANG. With only a few Chinese B2C ADR listed in the US exchange and the current low stock price of DANG, I am leaning toward the first possibility.

3. Product Diversity and Logistic Improvement
One of the biggest obstacles facing Chinese E-commerce is the lacking in logistic and distribution system. E-commerce players find it hard pressed to guaratee quality and consistency in delivery. Customers are often frustrated with the quality and consistency of such service. B2B giant, Alibaba, the parent company of Taobao and B2C leader, Jingdong are both devoted to massive amount of capital in the improvement of logistic system.

DANG is focused on expanding product diversity and improving logistic system, e-book, baby, beauty, home décor,etc. With its dominance in book market, it can leverage its knowledge of reading pattern of its customer base and direct customers to products that may be of their interests. Of no lesser importance is a large amount of cash at hand . DANG has $246 million to put into the above implementation.

Caveat
The recent rally of Chinese concepts, especially internet related stocks, has put DANG at risk of an immediate pull back (which may have already taken place to a large extent) but it is definitely a stock worth a place in your watch list in 2012.



Disclaimer: I am long  DANG in my personal account as of 2/2/2012. However, I may have distributed the information to friends, family and affiliates prior to the post. My friends, family and business affiliates may have positions in stocks I mention.

Short squeeze on GMCR's earnings

As I am writing, the shares price of Green Mountain Coffee (GMCR) soared by over 22%  to $65.81 following its earnings release yesterday.

The once enamored star had been brutally attacked, not the least, by a high profile bashing of the renowned hedge fund manager, David Einhorn in October, sending the shares plummet from over $100 to as low as $37.

Yesterday, the company's announcement of a 102% rise in sales and a stunning 526% increase in operating income seemed to have garnered some confidence. The call did sooth the nerves of investors who were worried about the growth potential of the Keurig system and K-cup pack sales.

The Keurig system and K-cup did not seem the least bit losing momentum. "Our brewer sales in the first quarter of fiscal year 2012 were above our expectations, with approximately 4.2 million brewers sold by the combination of GMCR and our licensed partners. That total is more than half of the 6.5 million brewers sold in all of our fiscal year 2011," said Blanford, the CEO of GMCR. Taking away the effect of the acquisition of Van Houtte that contributed 13% increase in K-Cup pack sales, the company managed to raise the price point of K-cup by as much as 21% (talk about pricing power) and brought in a whopping 81% rise in sales volume.

The inventory was cited by critics as an issue. According to the management, it was a deliberate effort to meet the increase in demand. In the quarter ended December 31, 2011, inventories were $606.7 million compared to $269.1 million at December 25, 2010. However, more than half of the increase was due to a 266% increase in raw materials, most notably from an increase in green coffee volume and a 44% average green coffee cost increase. Combined with the growth in sales, a $162.4 million increase in finished goods inventory was hardly a sign of slowing sales.

With a current market in the mode to chase "growth", GMCR, with "growth" written all over its head, is back to the game. This is not all without caveats though. The management guided a 60-65% growth in net sales for the fiscal year of 2012. Given a 102% growth in the first quarter, investors who was looking for super growth above the company's past 3 years (75% compound annual growth rate) could very well be disappointed.

Disclosure: I do not have any position of GMCR in our personal account.

It's time for a uranium rebound?

Source: Press Release from Paragon Financial Limited – Wed, Jan 25, 2012 8:20 AM EST

"The Global X Uranium ETF, which holds over 20 uranium stocks, has surged more than 25 percent over the last month as positive guidance from some of the industry's largest players has renewed investor optimism in the sector. In addition, recent remarks from Chinese Prime Minister, Wen Jaibao have highlighted the country's intentions to focus on nuclear energy and limit its use of coal......................

China's primary economic planning agency, The National Development and Reform Commission, estimates that China can expand its current nuclear capacity of 10.8 gigawatts to between 70 and 80 gigawatts by 2020. According to the U.S. Energy Information's International Energy Outlook for 2011, China intends to add 106 GW of nuclear capacity by 2035. China plans to have 40 reactors by 2020 and, by 2030, enough additional reactors to generate more power than all 104 reactors in the US. In early 2011, following the tragic meltdown of the Fukushima Energy Plant, the Chinese State Council temporarily halted the construction of 27 nuclear power plants declaring the need for new safety regulations. During the delay, China re-assessed the safety of its planned and approved Generation-II reactor projects. "

My watch list: URS, URZ, URRE, USU, CCJ, DNN


My notes: I am not a chartist but these stocks' charts look stretched in the very short term. The risk/reward of entering the play now is not favorable. However,  this is a policy change that is important enough to lift a relatively small sector, thus worth noting and finding opportunities for building some small positions.

Disclosure: I do not have any position of the above stocks in my personal account.

Stocks and the Economy: Economic Slowdown?

Stocks and the Economy: Economic Slowdown?: "July manufacturing and non-manufacturing survey released by the Institute of Supply Management (ISM) pointed to a worrisome outlook of the ..."

Which stocks get hit by the budget cut? Part II

As the debt deal came to a close, most started to worry about ramifications of budget cuts on the economy. Most of the cuts will not take place until 2014. discretionary spending, which excludes Social Security, Medicare and Medicaid, would be cut $21 billion in 2012 and $42 billion in 2013, according to an analysis by the Congressional Budget Office. The spending cuts wouldthen  increase to $75 billion in 2015 and $156 billion in 2021. Overall, the first phase of cuts would reduce spending by $917 billion over 10 years. A congressional committee would decide on a second phase of cuts totaling $1.5 trillion. One condition that popped out involved defense spending. If lawmakers fail to reach a deal on a second round of cuts, the Pentagon's budget would be cut automatically by about $500 billion.

Defense-related stock prices such as General Dynamics (GD), Lockheed Martin (LMT), etc, had been shedding since July, anticipating such budget cuts.


Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author may have released this information prior to this post to affiliates or parties that have financial interests in trading on this information. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.



Disclosure: The blog author does not own any of the above positions in her personal account as of August 2, 2011

Which stocks get hit by the budget cut? Part I

While budget cuts are inevitable following the debt ceiling deal, the Centers for Medicare and Medicaid Services surprised the market on Friday that it planned to reduce payments to skilled-nursing facilities by 11.1% for fiscal 2012, cutting $3.87 billion out of the spending plan. The 11% was much larger than the 5-6% that was anticipated. CMS said in a note Friday that the rates “correct for an unintended spike in payment levels and better align Medicare payments with costs.”

The news hit nursing and healthcare facilities. Catching the eyeball was Sun Healthcare Group (SUNH) which dropped more than 50% in a day. Others hard hit by the news included Skilled Healthcare Group Inc.(SKH), Kindred Healthcare Inc. (KND),  Ensign Group Inc.(ENSG) , National Healthcare Corp. (NHC) , Five Star Quality Care Inc. (FVE). Real Estates Investment Trusts (REITs) that cater to nursing and healthcare facilities did not escape the slump. Omega Healthcare Investors (OHI) , Health Care REIT Inc. (HCN) , HCP Inc. (HCP) all lost more than 6% on Monday.

General care hospitals soon joined the slump as the market anticipated further Medicare/Medicaid cut would involve this group that included HCA Holdings Inc. (HCA), Community Health Systems Inc.(CYH) and Universal Health Services Inc. (UHS).



Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author may have released this information prior to this post to affiliates or parties that have financial interests in trading on this information. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.

Disclosure: The blog author does not own any of the above positions in her personal account as of August 2, 2011

可乐股吧 Coke and King Kong: 天然气汽车-初步涉猎

可乐股吧 Coke and King Kong: 天然气汽车-初步涉猎

Coke wrote on stocks related to natural gas engines/vehicles

Citigroup Bullish on Potash

I ran into a useful excerpt from the Business Insider that I would like to share with you:


With potash prices riding high, and fertilizer fundamentals growing strong, Potash Corp (POT), is expected to have a strong second half this year.
Citi analyst P.J. Juvekar explains why:

•Fall is expected to be a strong season for fertilizers after Spring application came in 10% lower that expected because of a slow start to planting. With grain prices riding high, farmers are expected to usmore fertilizers to maximize yields.

•Supply of Chinese diammonium phosphates (DAP) and urea exports may be restricted because of the nation's sliding scale tariff policy. Urea exports are projected to decline to 5 million metric tons, from previous 7mmt, while DAP exports are expected to fall to 2mmt from 4mmt last year.

•The DAP market is also expected to be tight because of a ruling that has barred phosphate mining company Mosaic from mining in South Fort Meade. The Mosaic Company (MOS) may also have to buy large quantities of phosphate rock which is likely to constrain the market making room for Potash Corp (POT).

•Rising spot prices and the floor price for potash set by the China contract bode are expected to maintain price momentum. India imports all of its potash but even with a lack of contract settlement there, high global demand has kept the market tight. Potash Corp is looking for $590/st price for shipments later this year and expectations are that a portion new prices will be accepted by Q4.

Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author may have released this information prior to this post to affiliates or parties that have financial interests in trading on this information. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.




Disclosure: The blog author does not own any of the above positions in her personal account as of July 14,2011.

可乐股吧 Coke and King Kong: Coinstar 能从Netflix消息得利吗？

可乐股吧 Coke and King Kong: Coinstar 能从Netflix消息得利吗？

Alcoa's earnings and the global economy

Alcoa (AA), the largest aluminium producer in the world is broadly viewed as one of the barometers of the global economy. Analysts often look at AA's earnings release for some hints of economic conditions.
The second quarter report was no exception. The shares price of AA fell about 2% preceding the release and did very little  after it.

Bulls on the global economy may have found assurance from AA's forecast. For the year, Alcoa projects aluminum demand to grow 12% on top of the 13% growth witnessed in 2010. What is better is that the optimism is broad based, including aerospace (7%), automotive (4-8%), commercial transportation (7-12%), packaging (2-3%), building and construction (1-3%), and industrial gas turbines (5-10%).  According to Alcoa, aluminum demand would double by 2020 from 2010 on 6.5% annual growth.

By segments,

Alumina - The shipments  increased 11.8% year over year to 2.4 million metric tons on production of 4.1 million metric tons.  The price of alumina jumped 7%.

Primary Metals - Shipments were 0.7 million metric tons, almost flat with the previous-year quarter. Pricing improved. Production increased by 5% year over year to 0.9 million metric tons.

Flat-Rolled Products - Shipments jumped 24.8% year over year to 0.4 million metric tons. Both Russia and China continued to see positive trends. Besides, third-party volumes were up 41% in Russia and 30% in China compared with the second quarter of 2010.

Engineered Products and Solutions - Shipments surged 23.9% year over year to 0.57 million metric tons. The segment’s strong results were marked by new product developments and productivity improvements.

Obviously all the above results were partially offset by higher energy and raw material prices.

Not everyone shared the optimism. Citigroup analyst, Brian Yu lowered his 2011 earnings estimate to $1.21 from $1.25 per share and his 2012 estimate to $1.35 from $1.43, citing higher-than-expected input prices. Yu estimates that cash costs in the company's primary metals group averaged $1.11 per pound in the second quarter. He notes that if other producers are seeing the same high prices, then current aluminum prices are too low to offset them. He believes these cost pressures are continuing in the third quarter.


My takes:
AA's earnings release echoed another economic bellweather Fedex (FDX)'s earnings release that indicated that impacts on profit margins were contained. However, if oil prices stay stubbornly above $80 for the rest of the year, smaller companies that do not have global presense may not be in the same shoes.

Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.



Disclosure: The blog author does not own any of the above positions in her personal account as of July 13, 2011

Stocks and the Economy: The Timeline of The Fed's Exit Strategies

Stocks and the Economy: The Timeline of The Fed's Exit Strategies: "From the June FOMC meeting minutes , Step 1 : cease reinvesting some or all payments of principal on the securities holdings in Special Ope..."

可乐股吧 Coke and King Kong: 咖啡股经

可乐股吧 Coke and King Kong: 咖啡股经

GMCR, SBUX, JVA, PEET, CBOU, FARM. Coke wrote about coffee stocks stories in 2011.

Corn prices caught a break from China

In a previous post, corn (futures) prices plummeted on a USDA survey that reported more acreage planted than anticipated. July corn futures price dived from almost $8 to as low as $6.15. This sharp dive in crop prices also dragged down most of the agriculture-related stocks.

However, corn prices rebounced sharply to $6.75 after a report from USDA on US trade data and exports sales released on Wednesday and Friday respectively revealed that China bought 540,000 metric tons of corn from the US just last week, much more than the USDA's forecast of 500,000 tons for the whole year.

China is known to be the largest corn consuming country in the world. However, its timing to import corn has been elusive. USDA, as well as analysts will fumble to revise their exports estimates to China upward significantly.

From Wall Street Journal

The USDA is slated to update its outlook for China's corn imports in a crop report Tuesday. The agency will likely raise the forecast by 3 million to 4 million tons, said Shawn McCambridge, senior grains analyst at Jefferies Bache, a brokerage in Chicago.

USDA chief economist Joe Glauber wouldn't preview next week's report, but said the staff "will certainly be looking at this information" on recent China corn purchases.

"The fact they are in the market is significant," he said. "We expect them to be a bigger and bigger player in the corn market."

Market analysts are also now increasing their China corn import projections. Sudakshina Unnikrishnan of Barclays Capital predicts that China will import about 5 million tons in the 2011-2012 crop year. A month ago, she said she would have forecast about 2 million tons of imports.

"You don't know when or where they are going to make a big splash," said Paul Christopher, international markets strategist at Wells Fargo, "but they will,"

The fact that the Chinese is in the market is certainly bullish for agriculture related stocks such as POT, MOS, AGU, CF.

Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.



Disclosure: The blog author does not own any of the above mentioned positions in her personal account as of July 8, 2011

可乐股吧 Coke and King Kong: Lululemon瑜伽风姿

Click on the link for more details on LULU:
可乐股吧 Coke and King Kong: Lululemon瑜伽风姿

June 2011 Same Store Sales Scorecard

Whether it is the overly pessimistic downward revised estimates, or the rather sudden subsiding raw material and gasoline prices, or the unusually dry and hot weather, most retailers reported same store sales that beat analysts' estimates.

Luxury and Strong Brand

Leading the way were luxury and strong brand name retailers. Luxury departmental stores such as Neiman Marcus and Saks 5th Ave (SKS), strong brand superstore such as Costco (COST) and women's clothes, Limited Brands (LTD) whose flagship lingerie stores, Victoria's Secrets reaped a 17% rise in same store sales, all reported double digit same store sales growth.

Teenager brands such as Abercrombie and Fitch (ANF), Aeropostle (ARO), American Eagles (AEO) no longer provide monthly same store sales figures while Buckles reported a 10.4% same store sales growth.

ALL GOOD FROM NOW OR JUST AN ADJUSTMENT OVERDONE?

Just a little over a month ago, shares of retailers, especially apparel and shoe makers were beaten down on costs pressure and profit margin squeeze brought by record raw material prices (leather, cotton,etc) and rising gasoline prices that kept shoppers at home.

Commodity and energy prices went through almost a month of correction. International Energy Association (IEA) together with Obama's administration gave energy prices an ultimatum by releasing strategic petroleum reserves，an unusual move given the circumstances but a strong signal of the authorities's determination to stop the energy and commodity rally.  The market got the hint. Analysts very soon picked up optimism as gasoline and cotton prices retreated.

However, as many retailers getting ready to hike their products' prices, some as much as 10-15% to pass on higher costs, will the relief in gasoline and raw material prices be enough and in time to score a good report card for retailers in the summer?

Disclosure: The author does not own any of the above mentioned position in her personal account as of July 7, 2011

可乐股吧 Coke and King Kong: Green Mountain Coffee 和 K-cup

可乐股吧 Coke and King Kong: Green Mountain Coffee 和 K-cup

Coke wrote on GMCR

可乐股吧 Coke and King Kong: SODASTREAM,自制汽水？

可乐股吧 Coke and King Kong: SODASTREAM,自制汽水？
Coke wrote about SODA

可乐股吧 Coke and King Kong: Crocs再续

Coke wrote about CROX
可乐股吧 Coke and King Kong: Crocs再续